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Form vs. Function: When Is a Lease a 'True Lease'? The Seventh Circuit Applies Substance over Form in United Airlines v. HSBC Bank
Financing deals have become increasingly complicated as parties attempt to raise capital and take advantage of accounting and tax incentives. These transactions often face scrutiny when one party files for bankruptcy. During a Chapter 11 reorganization, a debtor must use all tools at its disposal to best restructure its obligations. In contrast, a creditor must work to ensure it receives the best possible return. The term “lease” is not defined in the Bankruptcy Code. Due to this lack of a clear definition, creditors and debtors will often attempt to recharacterize agreements between the parties. In this context, a secured creditor or debtor may argue that a “lease” is actually a disguised secured financing. In the converse, a party could also argue a secured financing is actually a “true lease.” This is due to the Bankruptcy Code's different treatment of secured debt and leases. Depending on the factual scenario, this differing treatment could significantly change the parties' obligations.
This article reviews the Seventh Circuit Court of Appeals' recent decision in United Airlines, Inc. v. HSBC Bank USA, N.A., 416 F.3d 609 (7th Cir. 2005). In this decision, authored by Judge Frank H. Easterbrook, the court held that it must look to the substance of a transaction and beyond the label given by the parties to determine whether it is a “true lease.”
Leases and secured finance transactions are treated differently by the Bankruptcy Code. If a transaction is deemed a secured financing, the secured claim will be tied to the current value of the collateral as opposed to the entire loan. Any undersecured portion of a creditor's claim is subject to the pro rata distribution to unsecured creditors. 11 U.S.C. '506. A secured creditor may be forced to accept certain treatment absent its consent under a plan if the Debtor complies with provisions of the Bankruptcy Code. See 11 U.S.C. '1129.
Yachts, Jets, Horses & Hooch: Specialized Commercial Leasing Models
Defining commercial real estate asset class is essentially a property explaining how it identifies — not necessarily what its original intention was or what others think it ought to be. This article discusses, from a general issue-spot and contextual analysis perspective, how lawyers ought to think about specialized leasing formats and the regulatory backdrops that may inform what the documentation needs to contain for compliance purposes.
Hyperlinked Documents: The Latest e-Discovery Challenge
As courts and discovery experts debate whether hyperlinked content should be treated the same as traditional attachments, legal practitioners are grappling with the technical and legal complexities of collecting, analyzing and reviewing these documents in real-world cases.
Identifying Your Practice's Differentiator
How to Convey Your Merits In a Way That Earns Trust, Clients and Distinctions Just as no two individuals have the exact same face, no two lawyers practice in their respective fields or serve clients in the exact same way. Think of this as a "Unique Value Proposition." Internal consideration about what you uniquely bring to your clients, colleagues, firm and industry can provide untold benefits for your law practice.
Risks and Ad Fraud Protection In Digital Advertising
The ever-evolving digital marketing landscape, coupled with the industry-wide adoption of programmatic advertising, poses a significant threat to the effectiveness and integrity of digital advertising campaigns. This article explores various risks to digital advertising from pixel stuffing and ad stacking to domain spoofing and bots. It will also explore what should be done to ensure ad fraud protection and improve effectiveness.
Turning Business Development Plans Into Reality
This article offers practical insights and best practices to navigate the path from roadmap to rainmaking, ensuring your business development efforts are not just sporadic bursts of activity, but an integrated part of your daily success.